NEW YORK, Oct 17 U.S. oil prices settled at
their lowest level in more than three months on Thursday as
stockpiles in the Cushing, Oklahoma, oil hub began to reverse a
months-long decline, and as signs of progress in talks over
Iran's nuclear program also pressured prices.

European Brent ended the day with the biggest one-day
percentage loss in one month.

Oil lost ground as some dealers fretted over the economic
fallout of the partial U.S. government shutdown in the world's
largest oil consumer, even after Democrats and Republicans in
Congress reached a temporary funding agreement.

Front-month December Brent crude settled $1.48 lower
at $109.11 per barrel. U.S. oil ended $1.62 per barrel
lower at $100.67, the lowest settlement price since July 2.

A combination of rising global oil supplies and weak
refinery demand due to seasonal maintenance also weighed on
prices.

Oil stocks at the Cushing, Oklahoma, oil storage hub rose by
836,798 barrels in the week to Oct. 11, data from energy
intelligence company Genscape showed on Thursday. Industry data
from the American Petroleum Institute released on Wednesday
showed Cushing stocks rose for the first time since early July.

Total U.S. crude stocks rose by 5.9 million barrels in the
week to Oct. 11, more than double forecasts in a Reuters poll of
analysts for a build of 2.2 million barrels. Government
data on oil inventories was not available this week due to the
shutdown.

The spread between the November and December U.S. oil
futures contracts CLX3-Z3 widened further to 28 cents.
Analysts had anticipated further widening of the first two U.S.
oil contract months if stocks at Cushing built. The spread
between Brent and WTI CL-LCO1=R widened as much as $8.93 a
barrel and settled at $8.24 per barrel.

The build in Cushing underscores rising supply, especially
from the United States, even as demand remains soft.

"We have an enormous amount of crude oil production
worldwide, especially here, and tepid demand growth," said Sarah
Emerson, managing director of Energy Security Analysis Inc in
Wakefield, Massachusetts. "We're in a surplus market and that
surplus is definitely going to start weighing on prices."

Signs of progress around talks over Iran's nuclear program
also pressured prices. Years of sanctions have cut Iranian oil
exports by more than 1 million barrels per day (bpd). The U.S.
described two days of talks with Iran as the most serious and
candid to date.

Some analysts have questioned whether Iran could quickly
ramp up production even if sanctions are lifted swiftly.

"They're ready to export," Emerson said. "I think they could
go up to 800,000 (bpd) or a million pretty quickly."

In the United States, President Barack Obama signed
legislation overnight to reopen the government and put off a
potential debt default, but U.S. lawmakers must iron out another
deal early next year to raise the debt ceiling. Funding runs
until Jan. 15.

Energy Information Administration (EIA) data, usually
released weekly on a Wednesday, were not released this week due
to the shutdown. The EIA said on Thursday it will publish weekly
oil inventory data for week-ending Oct. 18 on Thursday, Oct. 24.

The U.S. Commodity Futures Trading Commission also will not
release its weekly Commitments of Traders report on Friday.

(Additional reporting by Alexander Winning and Simon Falush in
London and Manash Goswami in Singapore; Editing by William Hardy
and Theodore d'Afflisio)

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